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Tuesday, February 22, 2011

Dollar Inflation remains the driver of the pricing environment for almost everything denominated in U.S. Dollars as long as the Fed continues to monetize debt. The debt monetization creates Dollar Inflation that results in Dollar Devaluation. As the Fed ramps up the QE II that they have announced will end in June, I expect Gold, Silver, and the PM stocks to aggressively rise.
In previous articles I have shown that fractal analysis suggests that:

Gold could reach $1860 into the May/ June period based on the late 70’s Fractal. I have also shown the potential for Gold to rise even higher if the market psychology is volatile enough – up to $1975, or even up to $ 2250.

The HUI at from HUI 940 to 970 by mid-June is a distinct possibility and we will discuss the fractal considerations for the PM stock indices further in the next editorial.

Silver could reach $52 – $56 into May – June of 2011 as explained in this article.

2 comments:

Oil racing to 100 dollars and the global revolution is still early. People still have faith in the dollar, but its degrading. At this point Silver and other commodities, along with the price of food, good shoot way up.

For a long time oil was in the hand of Western oil companies privately or state owned .‘The seven sisters”of big oil.with only small royalties flowing to the Oil Countries.

With anti-colonialism after WW2 a move to nationalization of oil began.Coups occurred against nationalizing countries, as in Iran, where the Shah was installed by Anglo American imperialism, with the CIA playing the organizing role.

In the Middle East Elite puppet monarchies and corrupt compradors were set up and militarily backed by the West to keep the elites in power, in order to prevent a “peoples” nationalist socialization of the oil as a basis for building socialism.

The Elites doled out handouts and corrupting bribes to the middle class and poorer people with ‘Muslim charity” to keep the people on side . Religion such as The Saudis Sunni Wahabi sect, justified the monarchial rule and elite looting morality ,as “Muslim” ,anti-communism and in “accordance with Sharia law”.

Under the old deal worked out by the Americans and supported by the OPEC monopolies ,with the Saudi Oil king puppets playing a role as “swing” price enforcer over other oil countries by adjusting supply to demand , oil was to be priced only in US dollars. The oil income dependent countries rely for incomes on the “world market” , dominated by the Rich countries whose people can afford to pay higher prices, this drives up prices for the poorer countries and a worldwide demand for dollars.This served as a sort of oil backing for the dollar after America was forced to abandon the gold backed dollar. As any and all countries needing oil had to pay in dollars.

This was the basis of the Fiat dollar hegemony in world trade and finance. With the dollar becoming the accepted world standard value and reserve currency.

Excess Oil dollars accumulated by the puppet elites that couldn’t be invested profitably in their own underdeveloped countries were re-invested, re-circulated back to America often by buying low interest American Treasury bills.

This the Americans found they could print dollars and exchange those paper dollars for real commodities like oil , vendor financed at low interest .

This was the beginning of the Great Ponzi Economy.

Over the years America as the sole source of printed dollars found ways of abusing its printing monopoly creating profits for America by continually devaluing the $ by inflation. Most dollars circulate outside America itself or are held as foreign $ reserves.

With the Dollar hegemony installed in world trade and finance, high waged America, (except for its government deficit financed armament trade) was even able to convert itself, from a real commodity manufacturing power exporting commodity goods to an unproductive shell.

In order to further cheapen the cost of its imports, Third world countries like China were promised dollar paper investment to build industry and to provide Chinese jobs in foreign owned export of cheap labor created commodity wealth factories .Companies like Wall Mart Were on a real winner as cheap labor profits were realized at sale in America. That worked fine, As long as the consumer credit supply lasted.

The Chinese too, even believed that the strong Fiat paper dollar represented real world value. And were silly enough to re- invest $ Trillions of their own dollar profits back in American treasuries and as vender finance for US housing bubbles .

America had however ceased to be a real profit wealth creating country but a services based economy.

America was now completely dependent on foreign credit Supply of re-circulated Dollars.

Its finance sector supplying credit became dominant accounting for 40% of Americas profits! In the end Ponzi banks selling Dud Bonds, falsely rated and valued AAA. The when the interest on the bonds could not be met ,the foreign money supply for the Ponzi economy died. Now America socializes its insolvent finance companies losses and prints credit and profits.